Differential Analysis for Further Processing

The management of International Aluminum Co$.$ is considering whether to process aluminum ingot further into rolled aluminum. Rolled aluminum can be sold for $$2,500$ per ton, and ingot can be sold without further processing for $$1,250$ per ton. Ingot is produced in batches of $85$ tons by smelting $530$ tons of bauxite, which costs $$110$ per ton of bauxite. Rolled aluminum will require additional processing costs of $$620$ per ton of ingot, and $1\mathrm{.}25$ tons of ingot will produce $1$ ton of rolled aluminum.

Required:

Question Content Area

$1.$ Prepare a differential analysis as of February $5$ to determine whether to sell aluminum ingot $($Alternative $1)$ or process further into rolled aluminum $($Alternative $2).$ If required, do not round interim calculations. If required, use a minus sign to indicate a loss.

Differential Analysis

Sell Ingot $($Alt$.1)$ or Process Further into Rolled Aluminum $($Alt$.2)$

February $5$

Line Item Description Sell Ingot

$($Alternative $1)$ Process Further

into Rolled Aluminum

$($Alternative $2)$ Differential Effects

$($Alternative $2)$

Revenues, per batch $Revenues, per batch

$Revenues, per batch

$Revenues, per batch

Costs, per batch Costs, per batch

Costs, per batch

Costs, per batch

Profit $($loss$),$ per batch $Profit $($loss$),$ per batch

$Profit $($loss$),$ per batch

$Profit $($loss$),$ per batch